21 research outputs found

    CONVERGING DIGITAL TECHNOLOGIES: AN OPPORTUNITY OR A THREAT?

    Get PDF

    Competing in Markets with Digital Convergence: Product Differentiation, Platform Scope and Equilibrium Structure

    Get PDF
    The incorporation of digital technologies into the products of diverse industries, accompanied by a shift to von-Neumann-like platform architectures, while resulting in substantially more valuable and flexible products, also leads to increased substitutability across previously distinct markets. This paper analyzes the economic implications of this trade-off in technology markets subject to digital convergence. We present a new model of imperfect competition that captures flexible platform scope, variability in consumer requirements, and multiple product purchases. We specify four types of equilibrium configurations - local monopoly, kinked, competitive and non-exclusive - that emerge as outcomes of the model, and describe how each equilibrium structure characterizes a distinct stage of digital convergence. Our analysis establishes that as markets converge, prices always rise initially even as competing products become less differentiated. However, when platform scope is largely dictated by exogenous factors, prices and profits eventually fall as the stage of convergence progresses, though consumer surplus and total surplus rise. Furthermore, while convergence has the expected effect of shifting consumption patterns from purchasing multiple specialized products to buying a single general-purpose product, we describe examples of equilibria in which consumers may buy multiple general-purpose products, using each for a specialized subset of their requirements. Pricing responses to changes in variable costs and consumer functionality needs are also discussed. When firms can make strategic choices of platform scope, we show that in any subgame perfect equilibrium, duopoly prices are always higher than monopoly prices, and industries may sustain high levels of profitability even when their boundaries blur. We also establish that as technological progress lowers fixed costs, a natural outcome is for unregulated firms to over-invest in platform scope relative to the social optimum, and that this outcome is true under both monopoly and duopoly market structuresInformation Systems Working Papers Serie

    Product Scope and Entry Deterrence in Technology Markets

    Get PDF
    We model an oligopolistic technology market in which firms endogenously choose product scope, fixed costs are affected by exogenous technological progress, and there may be threat of entry. Our analysis shows that equilibrium outcomes involve substantial overinvestment in product scope, which benefit consumers and hurt firms, relative to the social optimum. Technological progress generally increases consumer surplus and lowers firm profits. If entry is threatened bilaterally across two converging markets, both either accommodate entrants from the rival market, or both deter entry; continuous progress in technology can cause equilibria shifts, leading to discontinuous and radical redistribution of surplus across markets.Information Systems Working Papers Serie

    Market Expansion or Margin Erosion: The Double-Edged Sword of Digital Convergence

    Get PDF
    Digital convergence enables firms in the computing, communications, and electronic consumer industries to design and launch multifunctional converged products. This presents firms with a significant opportunity for value creation and profit growth. At the same time, the increased substitutability between products supplied by different industry segments heightens competition and poses a significant threat of margin erosion. These conflicting incentives make it difficult for firms in converging industries to make strategic product line and product design decisions. In our study, we analyze the technological, product, and market factors that have an impact on these decisions and derive conditions under which it is (and is not) optimal for firms to launch converged products that combine the functionalities of products in two different industries. We find that the optimality of including converged products in the product line depends crucially on the synergies arising out of functionality colocation. Further, as technology permits higher levels of product convergence, converged products relegate specialized products to narrow market niches, even when there is some quality degradation from functionality colocation. Overall production and total firm profits tend to increase, although the impact on consumer surplus and total welfare is ambiguous

    Leadership Training In An MBA Program Using Peer-led Team Learning

    Get PDF
    Leadership training is an important part of any MBA program, but is often difficult to provide in an effective way. Over the last three years, we implemented a program of Peer-Led Team Learning in two core courses of our MBA curriculum, which we believe provides a good solution. The program combines leadership training with practical hands-on application of the ideas taught, and provides for an effective feedback loop. Response to the program has been overwhelmingly positive. The program and benefits for learning leadership are discussed in this paper

    Product Scope and Entry Deterrence in Technology Markets

    Get PDF
    We model an oligopolistic technology market in which firms endogenously choose product scope, fixed costs are affected by exogenous technological progress, and there may be threat of entry. Our analysis shows that equilibrium outcomes involve substantial overinvestment in product scope, which benefit consumers and hurt firms, relative to the social optimum. Technological progress generally increases consumer surplus and lowers firm profits. If entry is threatened bilaterally across two converging markets, both either accommodate entrants from the rival market, or both deter entry; continuous progress in technology can cause equilibria shifts, leading to discontinuous and radical redistribution of surplus across markets.Information Systems Working Papers Serie

    Competing in Markets with Digital Convergence: Product Differentiation, Platform Scope and Equilibrium Structure

    Get PDF
    The incorporation of digital technologies into the products of diverse industries, accompanied by a shift to von-Neumann-like platform architectures, while resulting in substantially more valuable and flexible products, also leads to increased substitutability across previously distinct markets. This paper analyzes the economic implications of this trade-off in technology markets subject to digital convergence. We present a new model of imperfect competition that captures flexible platform scope, variability in consumer requirements, and multiple product purchases. We specify four types of equilibrium configurations - local monopoly, kinked, competitive and non-exclusive - that emerge as outcomes of the model, and describe how each equilibrium structure characterizes a distinct stage of digital convergence. Our analysis establishes that as markets converge, prices always rise initially even as competing products become less differentiated. However, when platform scope is largely dictated by exogenous factors, prices and profits eventually fall as the stage of convergence progresses, though consumer surplus and total surplus rise. Furthermore, while convergence has the expected effect of shifting consumption patterns from purchasing multiple specialized products to buying a single general-purpose product, we describe examples of equilibria in which consumers may buy multiple general-purpose products, using each for a specialized subset of their requirements. Pricing responses to changes in variable costs and consumer functionality needs are also discussed. When firms can make strategic choices of platform scope, we show that in any subgame perfect equilibrium, duopoly prices are always higher than monopoly prices, and industries may sustain high levels of profitability even when their boundaries blur. We also establish that as technological progress lowers fixed costs, a natural outcome is for unregulated firms to over-invest in platform scope relative to the social optimum, and that this outcome is true under both monopoly and duopoly market structuresInformation Systems Working Papers Serie

    Exclusive Licensing in Complementary Network Industries

    Get PDF
    This paper develops and analyzes a model of competition between platforms in an industry with indirect network effects, with a specific focus on complementary product exclusivity. The objective is to understand the determinants of exclusivity and explore its effects on competition. We find that the stage of platform market maturity and the asymmetry between the installed bases of platforms are critical determinants of exclusivity. Exclusivity is the dominant outcome in the nascent stage of the platform market and is sometimes the outcome in mature stages as well, while non-exclusivity is the usual outcome in the intermediate stages. In the nascent stages, the bigger platform secures exclusivity, while in the mature stages it is the smaller platform

    Exclusive Licensing in Complementary Network Industries

    Get PDF
    This paper develops and analyzes a model of competition between platforms in an industry with indirect network effects, with a specific focus on complementary product exclusivity. The objective is to understand the determinants of exclusivity and explore its effects on competition. We find that the stage of platform market maturity and the asymmetry between the installed bases of platforms are critical determinants of exclusivity. Exclusivity is the dominant outcome in the nascent stage of the platform market and is sometimes the outcome in mature stages as well, while non-exclusivity is the usual outcome in the intermediate stages. In the nascent stages, the bigger platform secures exclusivity, while in the mature stages it is the smaller platform
    corecore